Home Construction Rates Fall But Still Exceed Expectations

Although home construction rates declined in the month of February, they still exceeded the expectation of analysts and economists. The government published the home construction statistics recently, which revealed this trend.

According to the figures released in the report, both home construction and building permits witnessed a decline in the month of February. However economists were still pleasantly surprised as the dip was not as bad as they had predicted.

While new home construction fell to an annual rate of 575,000 in February, which was 5.9% lower than January’s figure of 611,000, it was still 0.2% better than February 2009 figure. Back then the annual rate was recorded at 574,000. Economists had predicted that the annual home construction rates would fall to 570,000 in February, an expectation which was surpassed by the actual construction activity in the sector.

As for the building permits, the total number of permits issued in February fell to an adjusted annual rate of 612,000, which was about 1.5% lower than January. Compared with last year’s February figure of 550,000, these figures are definitely heartening. However, it is still a noteworthy fact that both new single family housing projects and building permits declined during the last month.

The ‘better than expectations’ performance of the housing sector is not wholly surprising or unexpected, owing to the government offered stimulus packages and general confidence build up in the economy. Experts have suggested that the homebuyer tax credit has also been a strong incentive to ramp up the activity in the housing sector.

Considering that only those homes where purchase formalities and processes are completed by the June deadline would qualify for the stimulus package, it is not surprising that the home projects have started well in time in February. The single family construction might also be benefiting from the fact that developers would like to showcase ‘ready to move in’ projects to prospective buyers.

New home construction projects where the building is a multi family structure with five or more units declined 43% last month while permits for such projects fell by 10%. Low employment rates are being credited for the decline. The demand for rentals has also gone down as most of it usually came from newly employed people. Analysts do not expect much improvement in this segment of housing even in the near future, although the hope is that the single family housing projects are likely to grow steadily.